18.IV.1.2.3 MiFID I Review: RM and MTF equity pre-trade transparency waivers and waiver process

Under MiFID I more than 90 percent of trading on RMs and MTFs was pre-trade transparent. The other 10 percent was dark due to the use of the MiFID I waivers.1 The waivers were drafted in a principle-based manner, which provided freedom in their interpretation.2 To ensure sufficient convergence a voluntary waiver process was set up within CESR, later succeeded within ESMA. The CESR/ESMA waiver process was formally non-binding.3 The EU believed that rule-based (instead of principle- based) waivers under MiFID II would result in a more consistent application of the waivers across the Member States. Although highly controversial, it was the final EU opinion to tighten two RM and MTF waivers, being the reference price waiver and the negotiated trade waiver for liquid equity instruments. MiFID II introduces a cap on these two waivers (double volume cap) in order to ensure adequate price formation.4 Finally, the EU prefers the voluntary waiver process of MiFID I to be formalised into binding law. MiFID II formalises the MiFID I waiver process into EU regulation.5